Business

09/10/2014

Succession planning where company ownership is concerned can be fairly complicated, but at a simple level every plan is based on two basic issues. You’ve probably thought a lot about who will take over for you; that’s one. But, just as importantly, how can you make sure what you want to happen will happen? Without the right short- and long-term plans in place, it won’t.

Business succession planning focuses on two main concerns. On the one hand, what will happen way down the line when you're ready to give up the business? And, on the other hand, what will happen to the family business if you pass away tonight?

Essentially, these are the same kinds of thoughts and approaches you should begin with in all aspects of your life, property and estate. However, there is a special difficulty when it comes to a business. Proper planning has, at all times, one foot in the future and one foot in the present because you never know when the unthinkable could happen.

Do you have a plan in place? If you do, does it take everything into consideration? If you don't, now is the time to start putting the pieces into place. Even if you have not yet gotten your thoughts together for a long-term plan, you absolutely must have the short-term plan safely in place.

11/13/2013

All
too often, an entrepreneur convinces himself no one will notice these issues
and, once the sale is finalized, they all will be resolved. But as deals
are negotiated between buyers and sellers, these top five truths surface over
and over again.

If you are a business owner and
thinking of selling ... are you ready?

You Really Don’t
Matter. Ouch! Buyers simply want to buy a business that is profitable
in-and-of itself. When you, the owner, are not the greatest asset of the
business, then the business is generally considered to be more attractive.

Buyers Know
Which Employees They Will Keep. That is right. Over the years, you may have
hired family and friends as employees. While you value them, the buyer may not.
In fact, the buyer likely has his or her own family and friends to employ.

Even Good Debt
May Catch Up to You. Debt is debt. The red and black ink on your business
ledger can get in the way, especially if it is not structured properly.

Handshakes and
Signatures May Do You In. Your business wheeling and dealing may kill the
deal. In other words, the buyer will have to contend with those agreements,
promises, and sheer liabilities you have incurred building your business. This
is commonly a problem when “agreements” were done on the fly, never reduced to
writing or barely a handshake. A disadvantageous agreement penned in black and
white can be as damaging as a solid agreement can be lucrative. It is the
proverbial two-edged sword.

Your Business
May Be Your Accountant’s Biggest Annuity. Not only may family and friends
get their paycheck under your signature, but so do various professional advisors.
This can create (potential) conflicts of interest. Just be alert. If outside
advisors find their “rice bowls” threatened, then they may drag their feet or
at least be less than helpful.

The original article goes into
much more detail, with even a bit more brow-beating.

Bottom line: the sale of your
business is fraught with many challenges. Proper planning is key to navigating
them successfully.

05/31/2013

There are myriad ways to begin the exit
process from your business without giving up management control. [Here] are some ideas to structure for an
eventual departure, without having to hand over the keys to the business right
now.

Business succession planning is
an inevitable process, one of which needs to be addressed well before you are
ready to “clock out” for good. And since it took time to build your business
the right way, it will also take proper time and planning to leave it on your
own terms. Luckily, you can start planning your exit in such a way that allows
you to retain management control during the process.

So, how do you structure the
business so that you can start succession while still sitting on the throne? A
recent Forbes article titled “How To Retain Control, Even As You Exit”
provides some practical advice.

At the most basic level, you may
want to adjust the structure of the business itself. Is it an LLC? If yes, then
retain control by making it a “manager-managed” LLC and retain the management
position. Is it a corporation? If yes, then there are more options. For
instance, you could issue various types of stock, either in different classes
(voting vs. non-voting), or even offer restricted stock that becomes vested
only upon certain conditions. The corporate structure also offers other
powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements.

Your approach and the timing of
your exit will depend on other factors, not the least of which hinges on your
successors. When will they be ready to assume more control? Even more
important, when will you be ready to begin relinquishing control?

More often than not, you can
structure an exit so both control and financial gain slowly adjust to
everyone’s benefit, but you have to start with a plan.

02/06/2013

Have you considered co-founding a new business with a family member or
friend? If so, you’re in good company –Fox Business reporter Susan Shreter
reports that about half of today’s startups are co-founded among friends, family
members or spouses.

Going into
business with a friend or family member? It certainly makes sense that one
would want to pursue their most ambitious goals with people they trust. But is
doing so good or bad for the relationship you have with your co-founder?

When working
with friends, expectations of loyalty and understanding are higher than is
common among everyday work colleagues. And when friends let us down,
resentments can linger and cause a deep divide in both work relationship and
personal relationships.

#1: Unmet Expectations. The
typical startup business will take a lot more time and money to become
profitable than anyone ever expects.

#2: Work Style Conflicts. Even
though friends get along great when hanging out at the bar, this compatibility
may not resonate in the office
environment.

#3: Business Strategy
Disagreements. New startup partners tend to be well aligned to the grander
goals of an organization, but rarely have worked through the details of how to
achieve these goals.

#4: Spending Conflicts. One of
the most common areas of disagreement is spending authority and budget
priorities.

#5: No Way Out. What happens when one
partner wants to sell out, quit or reduce involvement in the business?

A recent Forbes article, titled “Co-Founding
With a Friend - - Without Decimating a Friendship,” shares a few words of
wisdom from successful businesses founded by friends. One startup says “when
making decisions, we make the conscious decision to not be disrespectful
because at the end of the day, we want to stay friends.” Another startup
recognizes the importance of keeping work and personal lives separate.

In order to avoid any
misunderstandings that could potentially end the business or the friendship, it
is important to discuss all issues that might interfere with productive
business building.

02/04/2013

Older
workers come to the table with experience, maturity and dedication… But older
workers who do wind up unemployed often struggle to recover.

In a new year, many companies begin to re-evaluate their staffing
needs. This might mean companies will increase their hiring initiatives, or
they could decide to shed jobs. Either possibility means having an updated
resume ready may pay dividends. Even if nothing changes for you, it wouldn’t
hurt to have a spruced up resume.

For older individuals, reaching retirement means managing a budget
with savings, social security, and part-time income. Having a polished resume
is extremely important, as an analysis of the
most recent job data by the AARP Public Policy Institute shows. Consider
this: unemployment for older job seekers is now
56 weeks on average, compared with 37 weeks for younger workers. In light of
this trend, it is crucial for older workers to revise their resumes to catch
the eye of potential employers.

As reported in The Wall Street Journal, a
new program known as the American Association of Community Colleges’ Plus 50
Initiative is helping seniors do just that. The Plus 50
Initiative recognizes the experiences, skills, and
leadership that the baby boomer generation possesses. Given the possibility of
unemployment facing many older workers, the Plus 50 Initiative seeks to harness
the experience of an older generation and use it to teach new skills to an
already successful generation.

Many times, the only thing standing between a
senior and a job is a lack of technical knowledge and computer experience.
Taking a short class on computer software is one of the best ways for older job
seekers to brush up on these skills, enhance their resumes, and show employers
that they are up to date with technology.

Consider taking some time to reevaluate how you
can best market yourself in an ever-changing economy and job market.

01/04/2013

Employees who are challenged, engaged, valued, and rewarded
(emotionally, intellectually & financially) rarely leave, and more
importantly, they perform at very high levels. However if you miss any of these
critical areas, it’s only a matter of time until they head for the elevator.

Job change is
a fact of life for men and women in today’s workforce, and many workers change
jobs frequently during their employable years. With all the shifts in the
working world, it’s no secret that training employees is costly and good talent
is hard to find. So, why don’t more CEO’s and managers focus on retaining
talent?

If you have a
high turnover rate within your staff, this article may be worth reading. Once
you’ve read the article, follow through with the recommendations or else you
may be at risk of losing your most talented employees.

06/25/2012

It is better to never be a general partner if one can avoid it. But if a person is going to be a general partner of a limited partnership that is either conducting any substantial business or taking investors, they had better do their own asset protection first.

Personal asset protection is a major motivator behind creating a business entity through which to conduct business activities. For certain entities that means the protection of a corporate veil, but others are less safe.

A limited partner then sued an entirely different general partner for the losses. The innocent general partner protested, arguing that he knew he was liable to third parties (which is bad enough), but not to limited partners in the same way. Unfortunately, the court didn’t agree, ruling that it doesn’t matter whether the suit is third-party or internal since a general partner is liable for the entity of which he or she is a general partner. As stated in the original article, “general partner” is just another way of saying “generally liable.”

When choosing and using an entity to protect your assets and your individual liability, be sure to consult competent legal counsel to help you navigate the land mines.

You might say that an LLC is one thing, but a SMLLC, or a “single member” LLC, is a different beast entirely, at least from an asset protection point of view. To wit, the above article points out that a single member LLC is “an alter ego case waiting to happen.”

The case of Martin v. Freeman is, as you might have imagined, a “veil-piercing” case as Freeman was the sole owner of an LLC involved in some hefty litigation and sold the LLC’s property to, at least in part, help cover the legal fees of the litigation. Of course, that left the LLC with no assets to satisfy the judgment that came down against it and only one place to turn for that satisfaction: Freeman himself.

After all, Freeman had just under-capitalized the LLC, and did so by distributing funds to himself only to turn around and help pay legal fees for the LLC. “Undercapitalization” is the great leveler of corporations when it comes to asset protection and with little difference on record between “Freeman the LLC owner” and “Freeman the individual,” the corporate veil fell apart. Freeman was held personally liable.

This is one more lesson on a subject that always bears repeating. Single member LLCs aren’t exactly flawed by nature, but they are often the easiest to muck up. In the end, keeping things straight between yourself as the “business owner” and yourself as the “individual” requires some vigilance and diligence.

For more information on organizing Limited Liability Companies, visit my website or contact my office for an appointment.

02/10/2012

So we all know a [succession] plan is needed. But having the wrong plan can be just as disastrous.

It’s said that a little knowledge can be a dangerous thing. However, what is less often said, yet is ultimately just as true, is that just a little planning can be a dangerous thing. Improper and rushed planning will do you no good (and perhaps even harm).

This is especially the case with succession planning. Oftentimes, the lifeblood of a business is at stake even more than its assets. In that vein, then, a recent article in Registered Rep magazine described the three deadly mistakes of succession planning. The original article has an emphasis on financial advisors, but with a little rhetorical tweaking these mistakes are universal in application.

Don’t “build the wrong bench.”

Don’t stock your management team with the wrong people. Who are the wrong people? That depends on your business, but certainly for a family business that can mean a disinterested family member. It can just as easily mean someone who doesn’t share enough in the business goals or, in the other direction, one who doesn’t think outside of the box enough to see past them.

Don’t turn succession into a contest.

It makes for a great story when we read or hear about executives jockeying into position for a spot at the top, whether on TV or in real life. However, this jockeying doesn’t make good business sense (and come to think of it that’s usually the moral of the story when it is on TV). Competition for succession within a business can be destructive rather than character-building, and the business itself is what suffers.

Don’t act out of fear.

Acting out of fear of one’s death may be the most obvious and yet also the most difficult when you’re facing big questions. Rather, it’s important to center yourself on the task and get appropriate legal counsel to ensure the success of the process.

01/30/2012

There is a pent-up pipeline of owners who have had to put off selling in recent years because of the economy. And now that many of these companies have at least one year of profits on the books, they are more attractive to potential investors.

Whether we’re coming out of the recession is still very much in debate. Nevertheless, at least for some small businesses, the balance sheets are starting to look a bit better.

“Buy low, sell high” is conventional market wisdom. To some business owners coming out of the rut with a good year behind them, right now may be the “high sales” they’ve been awaiting. Yet for some investors right now may still be the “low buys” with an eye for growth.

Behind the scenes, however, there’s more than simple market dynamics afoot in 2012. As you may recall, it also is the last year of the Bush-era tax cuts as they were extended only until the end of 2012.

So, if you’re looking to sell the business, then 2012 will offer a lower capital gains tax rate, at 15% instead of the 20% slated to fall into place come next January.

If your business IS your personal wealth, then this is real money for your future and for your family’s future.

Why are you waiting? Unless you intend to keep you family business in the family, the tax planets are beautifully (albeit temporarily) aligned with those same Bush-era tax cuts in place – and the generous Gift and Estate tax levels.

Accordingly, I recommend a consultation with your trusted accounting, legal and financial advisors without delay.